A New Failed ADP Correction Method

[Guest D_NITSCHE]

In a recent discussion with another practioner, I heard about this method for correcting a failed ADP for one HCE : the HCE requests his/her w-2 corrected for the year in question and the plan administrator deems the excess to be an advance contribution for the next year. Has anyone used or heard of this approach ?

[Ervin Barham]

Sort of like a giant eraser came down and corrected the ADP before it happened!

Since the regs are pretty clear on the correction methods and the reporting, I would think this would cause major problems if discovered.

[Guest Beavis]

Heck, plenty of things will work as long as you believe the IRS will never show up at your door.

[LCARUSI]

First of all, I agree with Ervin and Beavis that it's bad idea.

But even if it were a valid approach, why is it preferable to anyone involved i.e the company or the HCE? You still have to calculate the amount to be refunded/carried ove to the next year. I see no advantage to the HCE.

Why not just do it the right way?

[Guest Mike Kimball]

I agree with the others. since the IRS has taken the time to produce accepted methods of correction, it's best to follow them!